Tuesday, May 22, 2012

Where can you afford?

Everywhere you look, mortgage rates are down. Conforming mortgage rates, FHA
mortgage rates, USDA mortgage rates and jumbo mortgage rates are each posting
all-time lows.Combined with slowly rising home values and an increase in the
national median income, for the first time in history, more than 77 percent of
home sold were "affordable" for everyday Americans.

Low Mortgage Rates Make For Low Mortgage Payments

According to the National Association of Home Builders, 77.5% of
homes sold last quarter were affordable to families earning the national
median income of $65,000. "Home affordability" is defined as having
housing payments that fall below 28 percent of household income assuming a
30-year fixed rate mortgage and a 10 percent downpayment.
The NAHB's definition of "affordable" is akin to what mortgage
underwriters call a "front-end ratio". You can be approved for a
mortgage with a front-end ratio north of 28 percent, but it may not be
advisable. In defining home affordability in terms of front-end ratios, in
other words, the homebuilders' association promotes a conservative approach to
homeownership.
That said, home affordability moved to record levels last quarter for three
main reasons :

Home prices climbed in many U.S.
markets, but only slowly. The list of real estate markets experiencing
rapid appreciation last quarter was a short list one (e.g.; San Francisco, California)

The median income level
improved nationally, rising 1% from the quarter prior

Most mortgage rates dropped
to their lowest levels in history between January-March

Rising home prices are no match for falling mortgage rates with respect to
home affordability. So long as mortgage rates stay low, home affordability
should remain high.

Cincinnati, Dayton, South Carolina
Remain Affordable

Keeping with the adage that all real estate is local, on a regional basis
last quarter, home affordability varied.
Cumberland, Maryland
topped the national rankings; 99.0% of homes in the Maryland border town were affordable to
households earning the median income there. Fairbanks, Alaska
followed in the number two slot with an affordability ranking of 98.9%.
Midwestern cities then stuffed the rest of the Top 10 Most Affordable Markets,
a list that features Indianapolis,
Indiana in the 5th slot for all
housing markets, and the top slot for "big cities".
95.8% of homes in Indianapolis
are affordable to households earning the median income there.
Other noteworthy cities scored as follows :

Dayton, Ohio
: 93.7 percent

Lakeland
/ Winter Haven, Florida : 93.2 percent

Springfield, Illinois
: 92.0 percent

Cincinnati, Ohio
: 90.2 percent

Columbia, South Carolina
: 89.3 percent

On the opposite end on the home affordability scale, the New York-White
Plains, New York-Wayne, New Jersey region ranked last in home affordability for
the 16th consecutive quarter. Just 31.5% of homes there are
affordable to families earning the local median income.

Looking For Low Mortgage Rates?

The housing market has good momentum. Home sales are higher and low mortgage
rates deserve at least some of the credit. So does the availability of low
downpayment mortgage programs.
The FHA's 3.5% downpayment program, and the USDA and VA programs allowing
for 100% financing have both helped keep home buyers in the market. See how
today's low rates and low downpayment loans can help you, too.